Pay plans for technicianswhich way to go?

These questions and responses are posted on the Automotive Management Network websitewww.automotivemanagementnetwork.comwhich is operated by Deb and Tom Ham, owners of Auto Centric (formerly Ham's Automotive) in Grand Rapids, Mich.:

A forum member writes:

I know there are a lot of discussions about incentive-based play plans. I want to go away from flat rates, but I don't want to pay salaries because I'm afraid my technicians' productivity will drop.

I've got two good techs I want to keep, so I want to pay them fairly. Can I get some examples of an incentive-based plan explained simply that works for all parties?

Tom Ham responds:

Here is a simple system that can be used as a foundation and then adjusted to your liking.

Let's say salary would be $1,000 per weektake half of that. Let's say the flat rate is $24 per hourtake half of that. Pay for the week is $500 salary plus $12 per hour for every flat-rate hour produced.

Another forum member replies:

If your tech produces 50 hours per week at $24 per hour, his gross is $1,200. Using this plan, the tech would have to bill 58 hours per week to stay even. Flat-rate is like capitalismit's not perfect, but it's the best system we have.

Another forum member writes:

How about a blended system?

Assume what the technician normally makes is $1,000 per week. In North Carolina, we are required to punch a time clock anyway for insurance. Pay 40 hours based on, say, 60 percent of his $1,000.

Figure the bonus on his remaining 40 percent to get the desired result and keep them motivated. You can play with the number infinitely. I made it match my budgeting and manage how many hours they are at work. Also, when the shop needs to be cleaned or inventory stocked, they are still getting paid.

I switched my guys from a salary-type pay to this in February, and my production initially came up 70 percent. It has leveled off a little, but all of my techs are averaging billing between 40- and 50-percent more hours than they billed last year.

The comments have been edited for clarity and brevity.

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